This story is update from its original posting on June 28.

Some investors watching the

Nasdaq Composite Index flit around 4000 on their computer screens last week were doing just that. Watching.

Web-based trading may seem fully developed, but in a flashback to their pioneer days,

Charles Schwab

(SCH)

customers were unable to trade stock online last Tuesday and Wednesday when the U.S. stock markets opened at 9:30 a.m. EDT.

Meanwhile, on Wednesday of this week, investors who tried to trade through

Web Street Securities'

(WEBS)

new, relaunched Web site struggled throughout the day with intermittent problems that blocked trading access.

On the same day as the relaunch, Web Street also began handling its own back-office operations in-house rather than sending them out to

U.S. Clearing

. Some isolated problems occurred during this morning's trading, a spokeswoman said, but the site was functioning normally in the afternoon. Web Street was still trying to isolate the problem.

Since customers can use the telephone to trade, the outages may not seem very significant. But they're coming on the heels of hundreds of millions of dollars spent on technology in the past year by Schwab, the nation's largest online broker, and its competitors. The difficulties highlight the fact that the technical quandary of serving millions of investors has far from disappeared.

The issue has been detailed in regulatory reports -- like the one issued by the

General Accounting Office

earlier this month -- but a solution still eludes the brokerages.

That needs to end, according to

Chase H&Q

analyst Greg Smith. "The online brokers need to get to that 99.9% level of reliability," Smith says.

While the technical problems don't threaten account growth, they are surprising, he says, particularly given that trading volumes have been so light. Nasdaq volume, which was hitting the 2 billion-share mark earlier this year, has dropped off in recent months. June has brought some recovery, but Tuesday's volume of 1.7 billion shares and Wednesday's volume of 1.5 billion shares are still far from peak volumes. (Retail investors' penchant for Nasdaq stocks makes that market the barometer for online trading volumes, which are expected to be down 30% in the second quarter from the first three months of the year).

Schwab's outages, which lasted for an hour Tuesday and 10 minutes on Wednesday, according to Schwab spokesman Dan Hubbard, were software-related, not volume-related. On Wednesday, there were also two or three hours during which order confirmations were delayed, he said.

He pointed out that, as always, Schwab customers could use automated telephone trading or the branches to place orders. But those resources have also been squeezed by growth. Schwab earlier this year sent a letter to customers apologizing for falling short of customer expectations when it came to customer service, particularly long telephone waiting times.

It's not just Schwab or Web Street having technology-related problems. According to the GAO's report, originally dated May 9, officials from the 12 online broker-dealers it interviewed had experienced either delays or outages. In the past two years, other names grabbing the outage headlines have been

E*Trade

(EGRP)

and

Ameritrade

(AMTD) - Get Report

.

Part of the problem that remains is to figure out when the brokers are falling short of expectations. Last week's outage went undetected by the financial press even though customer complaints made it onto some Internet message boards.

The only existing monitoring system right now is from

Keynote Systems

, but it doesn't necessarily reflect outages. For instance, last week Keynote found that Schwab's typical response time for creating a standard stock-order transaction was 8.04 seconds and its success rate 99%. The previous week its transaction time was 8.29 seconds and the success rate was 99.3%.

That could be changing. The GAO recommended in its report that the

Securities and Exchange Commission

require broker-dealers to keep constant records on system delays and outages and then monitor those records. The only way the GAO had of tracking these delays was through the major outages reported in the press.

For now, though, it's up to the brokerage to tell its customers what's going on. And based on one customer's opinion, so far it hasn't been enough.

"It cost me thousands this week alone," says a

TSC

reader in an email. "Who knows how many other people were similarly affected?"